States currently use three different types of marijuana taxes: as a fraction of price (it could be the retail or wholesale price of the products), based on the weight of the products (i.e., per gram), and based on the drug’s THC content (THC percentage). Some states use a different mix of these specific taxes.
The percentage of price taxes are just like a retail shop sales tax. The customer will pay a tax on the product price and the retailer hands this back to the state. Some of the states impose a fraction of price tax on the wholesale purchase, but this assumes that the cost is then handed on to the customer in the ending product price. Some states will also let local towns impose a percentage of price tax—this will typically contain a maximum sales tax rate.
The weight-based taxes are very closely related to cigarette taxes. Instead of taxing the whole pack of cigarettes, the cannabis tax is based on the weight of the cannabis products. States with weight- based taxes also will usually set different rates for different cannabis items. As with other wholesale taxes, it is presumed that most of the cost is then passed on to the consumer in the ending product purchase price.
THC Potency-based taxes are closely related to alcohol taxes. But, rather than taxing alcoholic drinks with a stronger percentage of alcohol at higher levels, the tax will be reflective of the cannabis item’s THC level. Illinois is currently the only legalized state with a THC potency-based tax.
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